BHP chief executive Mike Henry speaks at the Sheraton Cavalier Hotel, in Saskatoon, on June 13.Heywood Yu/The Globe and Mail
BHP Group’s Chief Executive Mike Henry said on Friday he was “cautiously optimistic” about the economic outlook for China, despite uncertainty.
“There is uncertainty in China – albeit, our view is that China is still going to provide a bit of stability or underpinning to global economic growth over the next 12 months,” the head of the world’s largest listed mining company said in a pre-recorded interview at the FT Mining Summit in London.
China, the world’s second biggest economy, accounts for more than 50 per cent of global demand for raw materials. Its economic outlook has been clouded by stringent COVID-19 curbs, disruptions to energy and food supplies caused by the Ukraine crisis and slowing global growth on the back of sharp rises in borrowing costs to curb red-hot inflation.
The International Monetary Fund forecasts China’s GDP will expand by just 3.2 per cent this year, down from 8.1 per cent growth in 2021.
So far, China has fought shy of the huge amounts of stimulus it introduced when economic weakness led to a drop in demand and a commodity price crash in 2015-6.
“We are seeing some green shoots in China by way of property sectors, so increased sales and increased completions,” Henry said. “We are not yet seeing that pull through to an increase in housing starts but we are seeing some more supportive policy, with encouragement being given to the banks to relax some of their lending practices for the property sector.”
BHP is a top producer of iron ore, used in the making of steel going into the construction industry, with more than 250 million tonnes mined in the financial year to June.
“We see steel production in China probably seeing another billion tonne-plus year, a slight decline from last year by 1-2 per cent, and then rebounding next year by circa 1 per cent, for what would then be the fifth year running of over a billion tonnes of steel production,” Henry said.
The mining giant is currently studying whether it could increase iron ore productivity above 300 million tonnes a year, Henry added.